The Quoddy Tides

Eastport, Maine

2008 Jul 25

LNG firm seeks suspension of lease payment

by Edward French

A proposal by Quoddy Bay LNG to suspend its quarterly lease payments to the Passamaquoddy Tribe was discussed at Sipayik Tribal Council meetings on July 15 and 22. The company is proposing not to make any more payments until it resumes the permitting process with the Federal Energy Regulatory Commission and the state Bureau of Environmental Protection. Quoddy Bay has suspended its permit work, pending the resolution of the quality of its liquefied natural gas supply and the possible relocation of its proposed natural gas pipeline to the Maritimes & Northeast pipeline.

According to Passamaquoddy Chief Rick Phillips Doyle, no action was taken on the proposal by the tribal council, and the tribal government now will be seeking legal advice on the issue. He says Quoddy Bay has made its lease payments to the tribe through this month.

In a letter to Phillips Doyle, Quoddy Bay LNG President Donald Smith wrote, "According to the land lease there must be BIA [Bureau of Indian Affairs] approval of the lease in order for the permit period commencement date to occur, and before quarterly lease payments would begin coming due. We had thought that the BIA could do this promptly, but the lawsuit filed by the dissident members of the tribe has shown us that 'approval' as required by the ground lease has not occurred. Since the BIA has not completely approved the land lease, the permit period commencement date has not occurred. Therefore, quarterly lease payments have not been due and are not now due."

The lawsuit brought by Nulankeyutmonen Nkihtaqmikon (We Take Care of Our Land) alleges that the BIA failed to comply with four federal laws in connection with its June 2005 approval of a ground lease authorizing Quoddy Bay LNG to develop an LNG facility at Split Rock, Pleasant Point, and asks the court to set aside BIA's lease approval.

In his letter, Smith states, "While Quoddy Bay has been making quarterly lease payments over the past year, even though they were not due, Quoddy Bay is no longer willing to do so, for a period of time. We had been willing to do that for awhile in order to get the reservation needed funds, but at this point feel we should revert to the provisions of the lease at least until we get some clarity on the BIA situation and see if our recent amendment is successful in mooting the lawsuit."

Smith stated that if Quoddy Bay does not receive word of the tribal council's agreement with the proposed suspension of payments by 5 p.m. on July 29, then the company will follow the dispute resolution procedures of the land lease. If the mediation procedures are unsuccessful, then the dispute would proceed to arbitration for up to six months.

The payment of the lease fees had previously been in dispute, with Quoddy Bay LNG not making the payments until the Passamaquoddy Joint Tribal Council signed a tax agreement. In 2006, the joint council had turned down the tax agreement, but after a proposal was approved to have Pleasant Point split the lease payments with Indian Township, the joint council voted in March 2007 to sign the tax agreement, which will lower the tribe's construction tax from 3% to 1% and eliminate all other personal and property taxes for the LNG project on Passamaquoddy land. Quoddy Bay then paid almost half a million dollars in lease payments that had been accruing over the past year to the tribe.